Obamacare Encourages Baby Boutiques to Bet on Breast Pumps

Aug 26, 2013 4:01:30 PM

Bloomberg BusinessWeekBy Patricia Clark2013 August 26

Since January, the Affordable Care Act has required insurers to cover breast pumps at no cost to new moms. That makes sense, given the law’s focus on preventive medicine. A 2010 article in the journal Pediatrics estimated that if 90 percent of U.S. moms were to breast-feed their infants exclusively for the first six months, it would save $13 billion a year in health-care costs.

The new law might seem like a bonanza for the breast pump trade, pumping millions to manufacturers and retailers. But it requires insurers only to cover pumps—high-end models cost $400 or more—purchased through durable medical equipment suppliers (DMEs). Those are companies eligible to be reimbursed by government and private insurance for certain kinds of medical equipment, usually for long-term use at home. The accreditation process is complex; the market is big: Retail spending for durable medical equipment was $38.9 billion (PDF) in 2011, according to the Centers for Medicare and Medicaid Services.

Before the law took effect, most DMEs didn’t offer breast pumps, and most stores that sold pumps weren’t accredited as DMEs, says Amanda Cole, who launched the Yummy Mummy on Manhattan’s Upper East Side in 2009 to cater to nursing moms. After she learned about the provision, Cole applied for accreditation as a DME and started courting insurers. “I thought my business was in jeopardy,” she says. “Who’s going to buy a pump when they can get it for free?”

Since the beginning of this year, when the breast pump benefit kicked in, Cole has increased her head count to 17 workers and rented space for a call center, so she could sell nationwide. The strategy is working: Cole, whose company became a DME last year, says she’s selling hundreds of breast pumps a week. “A lot of the DMEs are focused on the elderly and the sick,” she says. “They sell things like oxygen tanks and hospital beds. All we do is breast pumps, and that’s been a great proposition.”

The implementation of the benefit hasn’t been without hitches. Joy Kosak already had a breastfeeding business—she’s the cofounder of a Sacramento (Calif.)-based company called Simple Wishes, which sells hands-free pumping bras—when the new benefit took effect. She launched a new business called Pumping Essentials in November with two employees, waded through the red tape required to open a DME, and teamed up with her first insurer in April. She now has seven workers and says she’s selling about 300 breast pumps a month.

“The language is so vague that it’s being interpreted many different ways by providers,” Kosak says. That means some insurers will only pay for rental or manual pumps. Others have said that it takes weeks to fill out required paperwork, and some insurers have told women that pumps are not covered at all, according to a policy paper published last month by the U.S. Breastfeeding Committee.

Supply has also been a problem. Medela, a major supplier of breast pumps to U.S. hospitals, has increased production of its consumer models by 50 percent to meet demand. That isn’t enough to stop Kosak from worrying about future shortages. Currently, she says, she pre-orders five months worth of inventory to reduce the risk of running out of stock.

Part of the problem is that many DMEs didn’t offer breast pumps until this year, which means they lack historical data to forecast demand, says Rachel Mennell, a spokeswoman for Medela: “After the first year, I think everyone will be able to do a better job forecasting.”

Originally published at http://www.businessweek.com/articles/2013-08-26/obamacare-encourages-baby-boutiques-to-bet-on-breast-pumps